Norwegian investment manager Tor Svelland has criticised what he sees as too much negativity towards energy shipping stocks.
The founder of commodities and freight market hedge fund Svelland Capital believes tanker and LNG sectors can pick up very quickly.
After several years of soaring rates, a number of vessel markets have cooled in the past six months, he pointed out to TradeWinds’ sister newspaper DN.
Svelland said “crazy” short positions have now built up in shipping stocks.
He explained that this is betting on a price drop, but when prices rise, players can be pressured to cover short positions, which can push prices even higher.
“The problem with tankers is that there has been extreme negativity towards the oil market. This is primarily due to concerns related to Chinese demand,” he told DN.
“In addition, it may be that the shadow fleet accounts for larger imports to China and India than previously assumed, meaning that imports to these countries are stronger than the official statistics of recent months show.”
Svelland was previously chief executive of Fredriksen’s private Seatankers but departed in 2021 after completing a restructuring of parts of the group. He left the board of the tycoon’s listed tanker company Frontline in 2022.
Svelland Capital is not currently positioned for an increase in oil or tanker company stocks, even though share prices have fallen to what Svelland describes as interesting levels.
“It is a very complex market, but you can easily create a scenario where [crude] tankers improve and product tankers remain weak,” he said.
Where we should be
But he noted that average VLCC rates are only slightly below where the futures market indicated they would be a year ago: “We are about where the market said we should be. Many analysts, however, had overly optimistic estimates.”
LNG carrier spot rates, meanwhile, have crashed to below $20,000 per day, from $85,000 in August.
Svelland believes there will be a rebound, as high European electricity prices and low production from solar and wind will create a need for imports from the US and other countries.
“The LNG market is weak, but it is also the segment that I think can really turn around,” he said.
“The tanker market can also turn around very quickly. I think there have been some crazy short positions built up in shipping recently.”
The last time the industry heard from the former Fredriksen lieutenant was towards the beginning of 2023, when he was bullish on bulkers and tankers.
He said fleet supply was not meeting demand.
Clarksons Securities said shipping stocks were flat on average to end last week.
Bulkers faring better
“On the plus side, rising dry bulk rates drove dry bulk equities up 3%,” the investment bank said.
Fredriksen’s Golden Ocean and US owner Genco Shipping & Trading were both up 9% over the week.
But tanker equities dropped, with product tankers down 6% on average and crude companies falling 2%.
Guidance on rates for the fourth quarter has been cautious.
Ardmore Shipping fell 13.5% last week, Odfjell 12.4% and Okeanis Eco Tankers 9.5%.
Frontline has fallen 19% in a month, while product carrier owners Hafnia and Stolt-Nielsen are down 34% and 42% respectively since the peak in May.
Analyst Petter Haugen at ABG Sundal Collier said the stronger winter tanker market has yet to materialise.
He believes underlying demand is weak, particularly in China.
“It is obvious that the tanker market is not meeting the expectations that were there from the spring. The market has made that very clear,” he added.
“I had expectations that this winter market would be very good and lead into a very good 2025. It is largely Chinese demand that is surprisingly weak.”
